South Korea’s economy is feeling the pinch from the United States’ latest trade policies. The Bank of Korea (BOK) has warned that these tariffs could shave off 0.45 percentage points from the country’s economic growth this year. This comes straight from their latest biannual monetary policy report, highlighting how global trade tensions are hitting home.
Back in late July, after tough negotiations, Seoul and Washington struck a deal. The US agreed to slap a 15 percent tariff on South Korean goods—lower than the original 25 percent plan—in return for South Korea’s promise to invest $350 billion in the American economy. While this eased some immediate pressure, experts say the real fallout is just starting to show.
In the first half of the year, things stayed manageable thanks to US companies stocking up on inventories, pre-emptive exports from other nations, and businesses sharing the load. But moving forward, the Bank of Korea expects the tariffs to bite harder. Without these hikes, South Korea’s growth would look brighter, but the Trump administration’s moves are set to drag it down by 0.45 percentage points in 2025 and a steeper 0.6 percentage points in 2026.
The report breaks it down into three key ways these US tariffs impact South Korea’s economy: trade, finance, and uncertainty. Trade effects alone could cut growth by 0.23 percentage points this year, finance by 0.09 points, and uncertainty by 0.13 points.
On the trade front, higher export costs and slumping US demand—thanks to pricier imports—will hammer South Korea’s shipments across the Pacific. Industries like steel, automobiles, and machinery stand to suffer the most, as they rely heavily on the American market.
Financially, the tariffs might fuel US inflation, prompting tighter monetary policies there. This could slow down global financial recovery and ripple into South Korea’s real economy, making things tougher for businesses and consumers alike.
Finally, all this uncertainty from the tariff war is likely to scare off investments and curb spending. As the BOK puts it, “Uncertainties stemming from the tariff policy would reduce investment and consumption.”
With US-South Korea trade relations under the spotlight, South Korean policymakers are keeping a close watch. These developments underscore the broader challenges of international trade policies and their effects on emerging economies like South Korea’s.
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